Early Pension Tax Savings Options

[freespeech]

My partner and I are thinking of taking our NRA 60 pots 3 years early to use the lump sums for a large deposit on a new build to reduce the mortgage. Given we will still be working for RM what options, if any, are there to reduce the tax liable on the pension that will now be paid out in addition to usual wages with us continuing to work?

[RobertT]

I'm not sure this forum is the best place to get tax advice, but two things spring to my mind:

The Marriage Allowance. Although it doesn't sound as if it would apply in your case.
Info here: https://www.gov.uk/marriage-allowance

You could contribute to a DC pension and gain tax relief on your payments – effectively getting the tax back! But beware of any tax payable when you subsequently access it.

[NorthernBoy]

To reduce the amount of tax you would need to put as much as you can into a sipp, this will reduce your taxable income. Remember your pension income will only be taxed at 20% and not the 32% that your wages are.

[NorthernBoy]

To reduce the amount of tax you would need to put as much as you can into a sipp, this will reduce your taxable income. Remember your pension income will only be taxed at 20% and not the 32% that your wages are.

[freespeech]

Thanks to everyone for the responses.

I'm now trying to second guess the impact of my AVC's and DBCBS fund on NRA60 so I can consider a reasonable guestimate ahead of a final decision. Am I right in thinking that I can use 100% of my AVC's to fund some of the lump sum for NRA60? Also I know the DBCBS is primarily for NRA65 but have I seen something on here that suggests a small % can also be used for NRA60? I want max lump sum which will give me minimum pension but I'm trying to work out how much pension I would recover by using the AVC's and part DBCBS to fund some of the lump sum.

[RobertT]

If you use the normal 20x multiple to work out the value of your pension and treat that as 75% of your NRA60 'pot', the other 25% can be funded using AVC's/DBCBS.

For example:
Your NRA60 pension = £8k per year giving you a pot value of £160k. Therefore the max tax free lump sum from AVC's/DBCBS = £53,333.
Any remaining funds can be paid out as a taxable lump sum.

It is also possible to take the maximum 25% tax free lump sum from the pension, but that would mean tax implications for the AVC's/DBCBS.

The majority of the DBCBS is to be taken with RMPP benefits, which is 6 out of the 8 years of NRA65 pension. But as RMPP are also responsible for some inflationary increases on RMSPS benefits, some DBCBS can also be taken with NRA60.

[freespeech]

If you use the normal 20x multiple to work out the value of your pension and treat that as 75% of your NRA60 'pot', the other 25% can be funded using AVC's/DBCBS.

For example:
Your NRA60 pension = £8k per year giving you a pot value of £160k. Therefore the max tax free lump sum from AVC's/DBCBS = £53,333.
Any remaining funds can be paid out as a taxable lump sum.

It is also possible to take the maximum 25% tax free lump sum from the pension, but that would mean tax implications for the AVC's/DBCBS.

The majority of the DBCBS is to be taken with RMPP benefits, which is 6 out of the 8 years of NRA65 pension. But as RMPP are also responsible for some inflationary increases on RMSPS benefits, some DBCBS can also be taken with NRA60.

Robert - as always, thank you. Would you be willing to have a look at the detail in my case if I were to PM you some figures? Obviously the usual warnings would be noted that you aren't offering professional advice etc.

[RobertT]

I get PM's from time to time from people not wanting to make their details public, so that would be fine.

I'll try my best to help, if I can.

[freespeech]

I get PM's from time to time from people not wanting to make their details public, so that would be fine.

I'll try my best to help, if I can.

You are a star. PM sent with attachment. Thanks again.